Tips for First-Time Buyers Entering the Market
First-time buyers face more challenges today than they would have just five years ago, primarily due to market competition. To prepare, they should utilize specific strategies to become homeowners.
NEW YORK – Real estate has garnered considerable attention since 2020, and for good reason. Though speculators and real estate professionals may point to a number of variables that have affected the market for homes in recent years, the pandemic certainly was among those factors. Real estate prices and mortgage interest rates increased significantly during the pandemic and have remained well above pre-pandemic levels ever since.
The spike in home prices and interest rates has had a significant impact on young home buyers, some of whom feel as though their dream of homeownership may never be realized. And data from the National Association of Realtors® (NAR) indicates the median age of home buyers is now significantly higher than it was two decades ago. In 2023, the median age of buyers was 49, which marked an increase of 10 years compared to the average buyer age 20 years ago.
First-time home buyers may face a more challenging real estate market than they would have encountered just a half decade ago. The following three tips can help such buyers successfully navigate the market as they look to purchase their first home.
1. Expect to move quickly. Inventory remains very low, which means buyers are in heated competition for the few homes that are on the market. In late 2023, NAR data indicated the rate of home sales were the lowest they had been in 13 years, so buyers will likely need to move quickly and make an offer if they see a home they like, as chances are the property won't be on the market too long before it's sold. In fact, NAR noted that homes spent an average of just 23 days on the market in October 2023.
2. Apply for mortgage preapproval. The competitive nature of the market for buyers means it's in their best interests to arrange financing prior to beginning their home search. A mortgage preapproval can be a competitive advantage, as it indicates to sellers that buyers won't be denied a mortgage or lack financing after making an offer. The financial experts at NerdWallet note that buyers will be asked to provide details about their employment, income, debt, and financial accounts when applying for mortgage preapproval. Gather this information and clear up any issues, such as credit disputes or delinquent accounts, prior to applying for preapproval.
3. Set a realistic budget and expect to offer over asking price. A financial planner and/or real estate professional can help first-time buyers determine how much they should be spending on a home. In the current market, buyers should know that they will likely need to pay more than asking price for a home. For example, the NAR reports that 28% of homes sold for above list price in October 2023. With that in mind, first-time buyers may do well to look for homes that are under budget in anticipation of offering more than list price after seeing a property.
The real estate market remains competitive for buyers. First-time buyers can utilize three strategies to increase their chances of realizing their dream of homeownership.
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